A research project on

Fundamental Analysis of ICICI Bank Through Ratio Analysis

On the fulfillment of the two year Full time post graduation in MBA (finance)

Tirpude Institute of Management Education Civil Line Sadar Nagpur

Submitted By
Rajesh .B. Jangade MBA -4th Sem (Finance)

Supervised By
Miss. Sangita Deshpande Professor In (TIME)

Introduction
What is fundamental analysis?
Fundamental Analysis involves examining the economic, financial and other qualitative and quantitative factors related to a security in order to determine its intrinsic value. It attempts to study everything that can affect the security's value, including macroeconomic factors (like the overall economy and industry conditions) and individually specific factors (like the financial condition and management of companies). Fundamental analysis, which is also known as quantitative analysis, involves delving into a companys financial statements (such as profit and loss account and balance sheet) in order to study various financial indicators (such as revenues, earnings, liabilities, expenses and assets). Such analysis is usually carried out by analysts, brokers and savvy investors.

Many analysts and investors focus on a single number--net income (or earnings)--to evaluate performance. When investors attempt to forecast the market value of a firm, they frequently rely on earnings. Many institutional investors, analysts and regulators believe earnings are not as relevant as they once were. Due to nonrecurring events, disparities in measuring risk and management's ability to disguise fundamental earnings problems, other measures beyond net income can assist in predicting future firm earnings. Two Approaches of fundamental analysis While carrying out fundamental analysis, investors can use either of the following approaches: 1 .Top-down approach: In this approach, an analyst investigates both international and national economic indicators, such as GDP growth rates, energy prices, inflation and interest rates. The search for the best security then trickles down to the analysis of total sales, price levels and foreign competition in a sector in order to identify the best business in the sector. 2. Bottom-up approach: In this approach, an analyst starts the search with specific businesses, irrespective of their industry/region.

How does fundamental analysis works? Fundamental analysis is carried out with the aim of predicting the future performance of a company. It is based on the theory that the market price of a security tends to move towards its 'real value' or 'intrinsic value.' Thus, the intrinsic value of a security being higher than the securitys market value represents a time to buy. If the value of the security is lower than its 2

market price, investors should sell it. The steps involved in fundamental analysis are: 1. Macroeconomic analysis, which involves considering currencies, commodities and indices. 2. Industry sector analysis, which involves the analysis of companies that are a part of the sector. 3. Situational analysis of a company. 4. Financial analysis of the company. 5. Valuation The valuation of any security is done through the discounted cash flow (DCF) model, which Takes into consideration: 1. Dividends received by investors 2. Earnings or cash flows of a company 3. Debt, which is calculated by using the debt to equity ratio and the current ratio

Objective of the study

To analyze economy by using some economic indicators like GDP, and inflation rate etc for the selected period of 5 years. To analyze the industry especially private bank industry for the selected period of 5 years. To carry out financial and non-financial analysis of ICICI bank as a whole for the selected period. DATA SOURCES Secondary data has been collected from various sources to analyze the fundamentals. The secondary data has been collected from : Books ACE equity database Internet-websites

Introduction of company
ICICI BANK LTD ICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian financial institution, and was its wholly-owned subsidiary. ICICIs shareholding in ICICI Bank was reduced to 46% through a public offering of shares in India in fiscal 1998, an equity offering in the form of ADRs listed on the NYSE in fiscal 2000, ICICI Banks acquisition of Bank of Madura Limited in an all-stock amalgamation in fiscal 2001, and secondary market sales by ICICI to institutional investors in fiscal 2001 and fiscal 2002. ICICI was formed in 1955 at the initiative of the World Bank, the Government of India and representatives of Indian industry. The principal objective was to create a development financial institution for providing medium-term and long-term project financing to Indian businesses. In the 1990s, ICICI transformed its business from a development financial institution offering only project finance to a diversified financial services group offering a wide variety of products and services, both directly and through a number of subsidiaries and affiliates like ICICI Bank. In 1999, ICICI become the first Indian company and the first bank or financial institution from nonJapan Asia to be listed on the NYSE. After consideration of various corporate structuring alternatives in the context of the emerging competitive scenario in the Indian banking industry, and the move towards universal banking, the managements of ICICI and ICICI Bank formed the view that the merger of ICICI with ICICI Bank would be the optimal strategic alternative for both entities, and would create the optimal legal structure for the ICICI groups universal banking strategy. The merger would enhance value for ICICI shareholders through the merged entitys access to low-cost deposits, greater opportunities for earning fee-based income and the ability to participate in the payments system and provide transaction-banking services. The merger would enhance value for ICICI Bank shareholders through a large capital base and scale of operations, seamless access to ICICIs strong corporate relationships built up over five decades, entry into new business segments, higher market share in various business segments, particularly fee-based services, and access to the vast talent pool of ICICI and its subsidiaries. In October 2001, the Boards of Directors of ICICI and ICICI Bank approved the merger of ICICI and two of its wholly-owned retail finance subsidiaries, ICICI Personal Financial Services Limited and ICICI Capital Services Limited, with ICICI Bank. The merger was approved by shareholders of ICICI and ICICI Bank in January 2002, by the High Court of Gujarat at 4

Ahmedabad in March 2002, and by the High Court of Judicature at Mumbai and the Reserve Bank of India in April 2002. Consequent to the merger, the ICICI groups financing and banking operations, both wholesale and retail, have been integrated in a single entity. ICICI Bank is Indias second-largest bank with total assets of Rs.3,793.01 billion (US$ 75 billion) at March 31, 2009 and profit after tax Rs.37.58 billion for the year ended March 31, 2009. The Bank has a network of 1,454 branches and about 4,721 ATMs in India and presence in 18 countries. ICICI Bank offers a wide range of banking products and financial services to corporate and retail customers through a variety of delivery channels and through its specialized subsidiaries and affiliates in the areas of investment banking, life and non-life insurance, venture capital and asset management. The Bank currently has subsidiaries in the United Kingdom, Russia and Canada, branches in United States, Singapore, Bahrain, Hong Kong, Sri Lanka, Qatar and Dubai International Finance Centre and representative offices in United Arab Emirates, China, South Africa, Bangladesh ,Thailand ,Malaysia and Indonesia. Their UK subsidiary has established branches in Belgium and Germany.

SNAPSHORT OF ICICI BANK LTD Company Details Industry Chairman Managing Director Company Secretary ISIN Bloomberg Code Reuters Code Company Address ::: :::::BankPrivate K V Kamath Chanda D Kochhar Sandeep Batra INE090A01013 ICICIBC IN ICBK.BO Registered Office Landmark,Race Course Circle,Vadodara,390007,Gujarat 91-0265-6617200/3983200 91-0265-2339926 www.icicibank.com [email protected] 5

Phone Fax Website Email

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Limitation of the study

Fundamental analysis has some limitation involved in it. This limitation can be explained as under: Time Constrain: Fundamental analysis may offer excellent insights, but it can be extraordinarily timeconsuming. Time-consuming models often produce valuations that are contradictory to the current price prevailing on the exchange. Company Specific: Valuation techniques vary depending on the industry group and specifics of each company. For this reason, a different technique and model is required for different industries and different companies. This can be quite time-consuming process, which can limit the amount of

Research that can be performed.

The sales and inventory ratio may be very important for the cement sector company but these ratios are not very useful for the banking sector.

Inadequacies of Data:

While making analysis one has to often wrestle with inadequate data. While deliberate falsification of data may be rare, subtle misrepresentation and concealment are common.

Future Uncertainties:

Future changes are largely unpredictable; more so when the economic and business environment is buffeted by frequent winds of change. In an environment characterized by discontinuities, the past record is a poor guide to future performance.

Irrational Market Behavior:

The market itself presents a major obstacle while making analysis on account of neglect 6

or prejudice, undervaluation may persist for extended periods; likewise, overvaluations arising from unsatisfied optimism and misplaced enthusiasm may endure for unreasonable lengths of

Research methodology
Research methodology is a way to systematically solve the research problem. The research methodology using for find out the solution of the research problem is analytical research methodology and some extend descriptive research methodology .

Secondary Data The sources of secondary data for solve the problems are: Company Annual Report ACE equity database Internet-websites

Tools These are the most popular tools of fundamental analysis. They focus on earnings, growth, and value in the market. Earnings per Share EPS Price to Earnings Ratio P/E Projected Earning Growth PEG Price to Sales P/S Price to Book P/B Dividend Payout Ratio Dividend Yield Book Value Ratio Analysis Liquid ratio

Turnover ratio Valuation ratio

Techniques The technique used in the analysis of the company is excel sheets, graphs and tables of financial statement for example balance sheet, profit loss a/c, cash flow statement, dividend per share, ratio analysis, valuation ratio etc.

Bibliography
Books: Investment Analysis & Portfolio Management- Prasanna Chandra. Financial management R.P Rustagi

ACE EQUITY data base Websites: www.google.com www.icicibank.com www.rbi.org.in